BofA: We're Losing Hope For A Timely Fiscal Cliff Deal

With the fiscal cliff deadline just days away and House Speaker
Boehner's 'Plan B' disaster roiling markets, it doesn't appear as
if a deal is on hand.

In fact at his
press conference this morning, Boehner said called for an
overhaul of the tax code but said, "how we get there? God only
knows".

In a new note titled 'No Cliffmas Miracle' Bank of America's
Ethan Harris and Michael Hanson say there are five reasons that
we should be "cautious on the prospects of a quick or
comprehensive resolution to the fiscal cliff this year":

It is easy to put down general numbers and much harder
to come up with specific proposals. "On the spending
side, gimmicky cuts like indexing entitlements to the chain CPI
can only yield small spending cuts. On the revenue side,
raising the top tax bracket (households with income over
$400,000) increases 10-year revenues by less than $400
billion."

Raising the debt ceiling continues to be a
'sticky issue'.

The whole package will be "hard to swallow".
"We see a high risk that when the whole package is presented,
warts and all, there could be serious defections from both
sides. We would expect the President and Speaker to ask for a
simple up or down vote on the whole package to avoid endless
additional haggling. Faced with this stark choice, protest
votes are likely, in our view."

There is very little time. "We continue to see
an elevated probability (perhaps a one-in-three or one-in-four)
that they cannot get a deal done by year end. The result would
be either a temporary expiration of the whole cliff or a very
short term extension." The risk is that once the deadline has
been set aside once, they could keep doing so until the stock
market forces them to act.

The myth that going over the fiscal cliff will be
"relatively painless".